Drum.jpgRecession, what global recession? Goldman Sachs has turned bullish on China, upgrading its predictions for the country's GDP growth to a startling 8.3 per cent, safely above the 8 percent level that China's government judges to be the minimum necessary to keep the China success story on track.

Chutzpah it may be on Goldman Sachs part — most analysts are less bullish — but who can blame them? GS surprised the banking world this week by unveiling a Q1 profit and said it was anxious to pay back the $10bn bail-out it received from Washington following last year's near-meltdown of the western financial system. If GS can see the green shoots of recovery in its own business than foreign investors may be tempted to think its views on China are equally valid.

Next year, China's growth will surge back into double digits, reaching 10.9 percent, GS economists predict. But not all western analysts are convinced that China's rebound will come so swiftly.

Stephen Green, an economist at Standard Chartered in Shanghai, told the Daily Telegraph newspaper that while China's economic growth had accelerated from the end of last year, there is a huge amount of volatility in the numbers and a chunk of salt is needed

China announced its slowest economic growth in at least a decade last week, but analysts believe that there are some signs that the worst could be over. The world's third-biggest economy posted growth of 6.1 percent in the first quarter of the year, down from 6.8 percent in the final three months of 2008, underlining the impact the global crisis is having on China.

On a side note, Goldman Sachs last month said it will keep most of its 4.9% stake in ICBC, the Chinese banking giant, at least until April of next year. GS got the stake in 2006 when a western consortium led by GS was awarded a 10% share of ICBC's mammoth IPO — see this EngagingChina story. Like other western investment banks, GS has had to take a long hard look at its recent investments, but it has apparently decided that its ICBC stake is worth holding on to, at least until the dust has settled on the current banking criss.

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